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Mortgage Decision

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  • 13-01-2009 8:05pm
    #1
    Feng Shui
    Closed Accounts Posts: 14 ✭


    Hi,

    Would like people's opinions on this as I'm not sure what to do.

    Stupidly got a 3 yr fixed mortgage in 2007 at 5.24%, variable rate is now 4.13%. 21 months left on fixed mortgage and breakage fee is roughy €10,050. If i dropped to the variable rate now at 4.13% I would pay around €300 less on my mortgage each month but my outstanding balance would increase by €10,050.

    21 months * 300 = €6,300

    Breakage fee = €10,050

    Is the right choice to see out my fixed term? Or to take the hit on the breakage fee and hope they pass on the future rate cuts?

    Have to make a decision tomorrow before the ECB meeting on Thursday.

    THanks


Comments

  • Options
    #2
    3DataModem
    Registered Users Posts: 3,997 ✭✭✭3DataModem


    Call your bank manager, and offer a deal on the breakage (say, 7000).


  • Options
    #3
    Feng Shui
    Closed Accounts Posts: 14 ✭Feng Shui


    3DataModem wrote: »
    Call your bank manager, and offer a deal on the breakage (say, 7000).

    Is this the done thing? Would they negotiate as it wouldn't be in their interest to do so?


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    #4
    Senna
    Registered Users Posts: 8,800 ✭✭✭Senna


    Why do you have to make a decision before tomorrow? the breakage fee will change but it would be more important to know if your bank does or doesn't pass on the cut.

    From your figures, i'd stick with the fixed rate, trying to beat the bank is a mugs game and 10k is a ridiculous breakage fee. As long as you can afford the repayments.


    edit, are you saying they will add the 10k to the capital balance? if you dont have the 10K to pay then forget about it, it will cost you up to 20k to save maybe 10k.


  • Options
    #5
    Feng Shui
    Closed Accounts Posts: 14 ✭Feng Shui


    Senna wrote: »
    Why do you have to make a decision before tomorrow? the breakage fee will change but it would be more important to know if your bank does or doesn't pass on the cut.

    From your figures, i'd stick with the fixed rate, trying to beat the bank is a mugs game and 10k is a ridiculous breakage fee. As long as you can afford the repayments.

    Well the breakage fee will increase if the ECB cut rates which they more than likely will. The breakage fee is calculated on the difference in the interest rates in the fixed and variable on the balance of the mortgage multiplied by the number of days left in the fixed term.

    Seems like the right decision is to stick with the fixed mortgage.


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    #6
    PIMPHO
    Registered Users Posts: 470 ✭✭PIMPHO


    I would say stick with the fixed unless you can negotiate the breakage fee down.


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